My daughter voiced a desire to learn about all the holiday traditions, most likely in an effort to score more presents. So far we have attended a Hanukkah party, celebrated our traditional Christmas and are now on to Kwanzaa. Kwanzaa is a week-long celebration honoring African-American heritage and centers around seven core principles. I always thought it originated in Africa, but it actually was created in California in the late 1960's. Each of the seven days of Kwanzaa focuses on one of the seven qualities (I have simplified the definitions based on the song The Seven Principles by Sweet Honey In the Rock):
- Umoja-Unity that brings us together.
- Kujichagulia-We will determine who we are.
- Ujima-Working and building our union.
- Ujamaa-We'll spend our money wisely.
- Nia-We know the purpose of our lives.
- Kuumba-All that we touch is more beautiful.
- Imani-We believe that we can, we know that we can, we will anyway.
Since tomorrow is the day of Ujamaa (and since my daughters received some cash as gifts) we are going to use this week to talk about managing money. In the past, I have done this for my girls (read: stolen their money when they weren't looking and stuck it in the bank for them). But now that the Tooth Fairy has been making regular visits, my oldest daughter has managed to amass a small fortune. Here is what I plan to do:
- Sit with my daughters and count up what they have saved and talk to them about what they have received.
- Teach them to divide their funds 10-10-10-70. 10% will go to giving, 10% will go to savings, 10% will go to an investment fund and the remaining 70% is theirs to spend. I plan to demonstrate this using a dollar broken down into dimes--this way they can see how each dollar is divided (and they still get to spend most of it).
- Ask them how they would like to give---this can be people/organizations for those in need or establishments that help them grow (schools, studios, sports teams, recreation centers) etc.
- Set savings goals--it may help a child be more willing to delay the gratification of spending if they can be reminded of the coming benefit of saving (Oh you want to buy 7000 rainbow stickers? That will take away from your bike fund). I plan to set a short-term savings goal with them to determine what they might want to use their spending money for, as well as a long-term savings goal that they will use their savings for.
- Look into opening a savings account at a local credit union or bank. Teach them about bank fees, interest rates and the "small print" of the banking agreement. For older kids, you might want to discuss the challenges and benefits of debit cards, credit cards and using cash.
- Talk about investing. I am still learning about investing and until I learn more about where to steer my child, we will most likely put it in a 529 fund for college.
- Let them make mistakes-(7000 rainbow stickers it is!)
- Be an example of wise money-handling. Let them in on bill paying, budgeting, banking and savings and that time you splurged on a pair of shoes/tools/car/Vegas without planning ahead.
Here are a few links to help you get started this week. This is a big undertaking, but a very valuable lesson. Joyous Kwanzaa!
5 Ways to Raise a Financially Responsible Kid
4 money lessons for kids to master